I worked in Japan for more than 12 years in the eighties and nineties, in Osaka, Nagoya and Tokyo with the U. S. State Department, Citibank and Merrill Lynch. After many more years in China in banking (Deutsche Bank and Ping An Bank) and consulting, I am back in Tokyo conducting the business of Yangtze Century Ltd. (Hong Kong/Shanghai) and producing this blog. E-mail me at smharnerco@yahoo.com.

Japan Needs China More: This is the Real Danger in the Territorial Dispute

As fractious and potentially incendiary at the Japan-China territorial tempest has become–and it has become horrendously fractious and

日本語: 東シナ海ガス田掘削マップ (Photo credit: Wikipedia)

potentially incendiary, and will certainly get worse before getting better–it is not without a very important, even vital, silver lining.

It is this: the crisis’s sharp escalation has forced thoughtful Japanese to consider the costs to their country of severe, long term political and economic estrangement from China. What the analysis reveals is that prolonged political and, especially, economic and social estrangement from China would be an unmitigated disaster for the Japanese nation.

The truth is, not only today and tomorrow, but even more so in the years and decades ahead, as Japan’s economy matures and its population shrinks and ages, continued growth and prosperity of Japan’s economy and society will require increasingly deep and broad integration with a more vibrant Asia, and particularly with China.

And there is another critically important, not to be forgotten fact: while the past, current, and any sustainable future economic and trade relationship between Japan and China will be based upon mutual benefit, the fundamental truth is that Japan must value the relationship more highly than China because Japan really has no good alternatives. Not so China, which can get much or all of what it wants from Japan from many willing European and North American suppliers.

Put another way, the costs (including opportunity costs) of estrangement for China will be relatively small, easily bearable, and likely to decline over time. For Japan they will be huge, painfully onerous, and likely to rise over time.

In short, Japan and China need each other, but Japan needs China more (I would say much more) than China needs Japan. And when I say “needs”–for Japan–I mean a need that is vital. In this sense, in facing and thinking about the current crisis over the Senkaku/Diaoyu islands, the apparition that must appear to Japanese is a specter of doom.

Why then, and how, could Japan have gotten into a situation like this, and is there a way out?

I have written before in this blog that China had long been prepared to leave the matter of the Senkaku Islands/Diaoyu Dao unresolved between the two countries–and not to try to force a change in the status quo–with the important condition that Japan acknowledge China’s territorial claim (i.e., to admit that the islands were “disputed”). Japan, for its own reasons (though U.S. influence was probably a factor) steadfastly refused to acknowledge the Chinese claim.

Given this fundamental conflict, perhaps it was only a matter of time before a crisis erupted. In the event, the crisis was precipitated by Tokyo mayor Ishihara’s reckless bid to buy the islands from a private Japanese owner. It was to this move–certain to be a provocation toward China–that the Noda government felt it had no choice but to respond with a national government purchase (“nationalization”) of the islands.

Is the Noda government move to be criticized as an amplification of the recklessness and provocation that would have resulted from Ishihara’s gambit? It is being justified as a force majeure response–an attempt to reduce the risks of more serious conflict with longer term–by the central government: a form of crisis management that was a lesser of two evils response to a set of bad options. But it was also the wrong choice among the options.

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lcshk, Simple question. How can you justify the recent Chinese government’s claiming sovereignty over Okinawa of Japan? How can you justify your claim over Taiwan where most of the residents do not want to belong to China? How can you justify China’s invasion to South Korea and India after the WW II? Tibet?

Thanks for the comments/questions, but your premise in the first one is incorrect. Nowhere is China claiming sovereignty over Okinawa. This is a serious, but unfortunately fairly widely held misconception. I hear Japanese people speaking fearfully that “if we give up the Senkakus, then next will be Okinawa.” China is not now seeking this type of imperial expansion and they will not do so in the future, in my opinion. The burden of proof of this accusation must be on those making it.

The Potsdam Declaration of 1945 places the disposition of all “minor islands”, including Okinawa, in the collective hands of the USA, UK, and Republic of China. Since neither the ROC nor the PRC have ever agreed with the post-war disposition of the Ryukyu islands, their status is still legally questionable.

That doesn’t mean that China has any true objection to Japanese sovereignty over Okinawa, but they could fabricate a perfectly legal objection to further other interests. For example, to pressure Japan over the Diaoyu.

Thank you for your comment, also in Japanese. Your point is that China also faces demographic decline and for this reason will not play such a leading role in Asia or be so critical for Japan’s economy in the future. I would answer that most forecasts still posit steady growth in China’s economic over the next 15 to 20 years, notwithstanding the demographic changes you mention. China’s economy will continue to get larger and richer, relative especially to Japan, over the next two decades. If Japanese companies do not participate in China’s growth as exporters or local manufacturers and distributors, then it is hard to see how Japan can avoid frightful economic and social decline.

Your comment about US influence is spot on. Since the ouster of Hatoyama over the Futenma base relocation plan, both Kan (until he went anti-nuke) and Noda have written blank checks to the Obama administration while ignoring the campaign manifesto that helped put the DPJ in power.

I will also note the first Kan and later Noda have described the Japan/US alliance as the core of Japanese foreign policy. Japan does not act unilaterally with China.

Ciu bono? The base issue goes away. Other Asian nations straddling the fence between an economically beneficial relationship with China and a security arrangement with the US might now lean toward the US which seems intent on isolating China in Asia.

There was once a mutually beneficial joint-venture arrangement between Japan and China to develop the seas around the Senkakus that ignored any concerns about the sovereignty of the islands but that fell apart several years ago leaving us with the current situation. Why?

Lastly, one can not dismiss that China could be threatening US ally Japan as a counterbalance to US threats against Chinese ally Iran. There is much more to this story than an incompetent Japanese government and a provocative Chinese government. And to be sure, the US is not simply sitting on the sidelines wondering, “Why can’t we all just get along?”

Japan has already gone through 20-30 years of decline in terms of its economy and its population aging issue. And worst of all, it has no clear future direction in those years.

Japanese has arise from its WW II demise to become a strong no.2 now no.3 economy in the world due to its technological and production efficiency advantage but now all these are overtaken especially by Korea and China.

Look at all the consumer electronic products, in the past it used to be Sony, Toshiba, Panasonic, Sharp etc that leads the world now it has been overtaken by the Koreans and for the lesser quality to the Chinese.

The next area that will see Japanese fall is their automotive which I believe will be in 5 years time overtaken by the Koreans and even the Germans and Americans are overtaking them especially in China.

What is left for Japanese to lead is their remaining technological advantage in the electronic spare parts (no more the finished product) like Display Panel etc which I believe will also be overtaken by Koreans, Chinese and Taiwan.

I don’t see a future for Japan anymore and they will fall even worse if they continue to screw up their largest trading partner China.

Only if Japan work closely and happily through China we will then see some hope in Japan future.